Brace yourself: markets have further to fall

novazombie

Government stimulus is coming to an end

Until recently, markets would have taken a lot of this bad news in their stride. After all, a weak economy means the central bankers start oiling up their printing presses. The promise of low rates and money pumping are usually enough to put a spring in the step of investors.
But it may not be that easy. The fear among investors now is that central bankers may be reaching a point where they can't do much more to bail out stock markets. For one thing, they've already done a great deal. Interest rates are near enough zero in most developed economies. And trillions of dollars have been thrown at the problem. If that can't inspire a lasting recovery, then what can?
Perhaps more importantly, central bankers no longer seem to have carte blanche to do what they want. Federal Reserve chief Ben Bernanke may be happy to follow in the footsteps of his predecessor Alan Greenspan. But others on the interest-rate setting Federal Open Market Committee are less gung-ho.
As former Fed Vice Chairman Alan Blinder pointed out last week: "If it were just Ben Bernanke acting on his own, some further action might be closer." But "he has some significant resistance from within the FOMC."


http://www.moneyweek.com/investments/stock-markets/global-stock-markets-have-further-to-fall-03501.aspx

StevieJ

Spreading doom and gloom across the forums, I note but quoting Moneyweek is pushing it, stick to you DM quotes, they have more gravitas.

edinburgher

For copyright reasons, you really shouldn't copy such large blocks of text from an article.

Reaper

Talk of double dip is nothing new but I'm still not convinced. In my view it's not so much that the markets are sinking as that they were premature rising previously thinking the recession was over. So it is more a correction now than a crash.

Having said that I am light on USA investments at the moment. I rather wish I wasn't in them at all but it is too important a market to ignore completely. Nevertheless I currently have about 10% invested there compared to the 20% I would have had previously, and am fully expecting further losses. The rest of my portfolio is well spread around the world, particularly in emerging markets. Japan is the one exception where I have almost nothing.

The article mentions unemployment, but that by itself is not in indicator that the markets will fall. Indeed if you look at past crashes you will see typically unemployment continuses rising even as the market turns from bear to bull. This is because the market looks at the horizon - if they think the end in in sight they will buy even if things are getting worse day to day.

In my view fears of a double dip are keeping stocks nice and cheap. I am steadily investing over time on the basis that while I don't know exactly where the botton is at least I can be sure we are not at the top.

For people willing to stick it out for the long term I think now is a good time to buy - though preferably over time rather than with one off lump sums.

Just my inexpert opinion, but based on the past performance of economists and commentators they fare no better at predicting the markets than a blindfolded man with a pin. Worse in fact.

bendix

The problem Reaper, is that in this information age, there is just too much information (or opinion masquerading as information) out there and it's so easy to thrown off strategy by articles in moneyweek etc etc.

If you have an investment strategy, stick with it. Talk of double dips are irrelevant, unless you're hoping to liquidate your investments in the next year.

I have absolutely no problem with markets falling (although I agree with you that they have spent the last five months simply correcting, rather than falling drastically); on the contrary, I welcome it.

I too think shares are very good value at the moment and am sticking with my strategy of investing steadily over a period for maxium benefit.

Reaper

Yes, in the end what matter to me is how much a company earns compared to its share price - the P/E ratio in other words. Right now stuff looks cheap (as long as the companies involved survive of course!)

C_Mababejive

I'm not quite sure about the link between the Governments stimulus packages and the value of blue chip equities.

Many of them are well priced now and return good divis plus the real possibility of capital growth.

Obviously the best ones are big companies/defensive stocks such as utilities and other essentials.

paulw19

i'm a fan of oil stocks and quite like Exxon Mobil. well recommended at current prices. the closer you can buy to 55 though the better, think we should see that level shortly. probably also going to add BP shares around the 350 mark if possible.

RoyalSwank

I have £4k which I was planning to put into a S+S ISA in order to start a long term investing. My plan was to create a simple portfolio of diversified trusts / funds. As I'm in my early 30s and have a long term view I can bear some risk and I'm not worried about swings in my portfolios balance.

Initially I'm looking for growth as I get my feet wet. As I get older I should be able to increase the amout I invest year on year. As I get more experienced I'd like to start picking my own stocks.

All my research points to the fact that equities are cheap and it also looks like there's some good growth potential in emerging markets. I am however a bit concerned about a double dip for a few reasons:
- Although this is a modest sum and I have a long term view, I always think the entry point for any investment is important
- To contradict much of what I've said, though I am not planning to need the money in the next few years, with a child on the way and thoughts of buying a larger house, I'd prefer not to have too much of my investment erroded (because I entered the market at the wrong time) if I really needed to cash in.

I realise no one has a crystal ball, but I would be interested to hear your thoughts.

I'm currently considering putting the money in a cash ISA for the short term - seeing what happens with the markets and continuing my research.

Would anyone advise any other options to consider??

blinko

markets are volitile at the moment, id probably wait for friday news on US payroll data, although thats a punt in itself if its better thanmarkets expefations you will probably make 3% in a day on fund if its worse probably lose 2 - 3% so you can wait or take a punt there

otherwise its a wait and see, personally im holding till april next year, i think the short term gains are still there to be made and im expecting government cut backs to kick in around then, also i think the markets will pause for breathe so we will see

the best ISA is 3.75% which isn't too bad considering the markets state at the moment but again theres so much good news and bad news its up and down eg day far east data boosted ftse by 2.5% yesterday it was down by 2% midday but recovered to 0.1% gain

Reaper

RoyalSwank wrote: »

I'm currently considering putting the money in a cash ISA for the short term - seeing what happens with the markets and continuing my research.

What will you be looking for? Will a rise or a fall inspire you to invest? I bet you are thinking a longish period of rises but that means you will have missed the turning point.

Trying to spot the bottom of the market is a hopeless task. For that reason my view is you are best off drip feeding when the market is low. With hindsight some of it will turn out to have been bought at too high a price and some a complete bargain right at the bottom. Hopefully it will average out to a reasonable buy price. That's my strategy anyway, there are plenty of others.